houserefinancecenter.com Blog

Credit scores…do we need a new standard?

April 11th, 2010

How much emphasis do we put on a credit score? My friend JD’s uncle had a FICO score of 810 about a year ago. Right now he is at 720 and sinking. All he did was apply for a loan modification. And he was 3 days late once.

Uncle Joe hasn’t changed much. Still a solid dude, with good values, and an outstanding character. He did run into some financial troubles. But I’m sure he will pull through.

We are in a housing and economic crisis. Homeowners who faced foreclosure, or went through a short sale, came out with damaged credit. Some of these pe0ple were good law abiding citizens. Paid their taxes. Paid their mortgages. Put their kids through college. Will they ever get a “good” credit score again? The experts say it could take as long as 7 years to rebuild your credit.

The lenders are waving the credit score flag in front of you and telling you that they want a score of 750. That’s crazy. After all we have been through some rough time. Many of us had late payments, missed payments, partial payments and settlements. What percentage of the population has a score 750 and above? Who decides what score is adequate? A score that is good to buy a car might not be good for a house. For a house we might need 800 plus. Credit experts say that you must use your credit cards to get a good score. In other words, be in debt, pay the interest to the banks so that when you want a loan they will lend you some money at a ridiculous rate.

Entry Filed under: Credit